Divorce is a life-altering event that can have significant financial implications, particularly for women. While both partners may face financial challenges during and after a divorce, women often bear a heavier burden when it comes to retirement savings and Social Security benefits.

Unequal Division of Assets. In many divorces, assets accumulated during the marriage are divided between spouses. However, women often receive a smaller share of these assets compared to men, especially if they took time off from work to raise children or supported their spouse’s career advancement. As a result, women may have fewer financial resources to build their retirement savings.

Lower Lifetime Earnings. Women, on average, earn less over their lifetimes compared to men due to the gender pay gap and career interruptions for caregiving responsibilities. Divorce can exacerbate this disparity, as women may struggle to rebuild their careers after leaving the workforce or reducing their hours to care for children. Lower lifetime earnings mean less money available for retirement savings and lower Social Security benefits.

Disrupted Retirement Plans. Divorce can disrupt long-term financial plans, including retirement savings strategies. Women may find themselves starting over in terms of retirement savings, especially if they received a smaller share of marital assets or had to use savings to cover divorce-related expenses. Rebuilding retirement savings later in life can be challenging and may require working longer or making significant lifestyle adjustments.

Impact on Social Security Benefits. Social Security benefits are based on a worker’s lifetime earnings, so lower lifetime earnings result in lower Social Security benefits. Divorced individuals may be eligible to receive Social Security benefits based on their ex-spouse’s earnings record if certain conditions are met, such as the marriage having lasted at least ten years.

However, if a woman’s own work history is limited, she may rely heavily on these spousal benefits, which are generally lower than benefits based on one’s own earnings. If the woman remarries later, she will not be eligible to claim spousal benefits on her previous husband’s work record, but she can claim spousal benefits on the new husband’s record.

Lack of Access to Retirement Plans. Women are less likely than men to have access to employer-sponsored retirement plans, such as 401(k)s, especially if they work part-time or in industries with fewer benefits. This lack of access further hinders their ability to save for retirement, making them more vulnerable in the event of divorce.

Addressing these disparities requires policy changes, increased financial literacy, and support systems to ensure that women can achieve financial security in retirement, regardless of marital status. Because we often have little control over policy and larger societal systems, the individual’s best bet is to carefully make wise decisions for themselves.

If you’re a woman who is considering divorce or planning for retirement after the event, call us to schedule a consultation. We can work with you to identify strengths and weaknesses in your financial position and then craft a long-term plan for the future.